Continental Illinois National Bank and Trust Company of Chicago v John Paul Papanicolaou (The Fedora): CA 1986

The court considered the effect of a guarantee clause.
Held: The provisions of the guarantee went to timing and cash flow rather than liability. A term excluding a right of set-off is not to be treated in the same way as an exclusion clause. The court declined to construe the provision relied upon by the creditor as if it were an exclusion clause because it did not affect the liability of the creditor, which the guarantor was free to pursue once he had paid the sum demanded by the creditor: ‘It would defeat the whole commercial purpose of the transaction, would be out of touch with the business realities and would keep the bank waiting for a payment, which both the borrowers and the guarantors intended that it should have, whilst protracted proceedings on the alleged counterclaim were litigated. We do not doubt that the court has a discretion to grant a stay but it should in our view be ‘rarely if ever’ exercised, as Lord Dilhorne said in relation to claims on bills of exchange (in Nova (Jersey) Knit Ltd. v Kammgarn Spinnerei G.m.b.H [l977] 1 WLR 713, 722).’


Parker LJ


[1986] 2 Ll Rep 441, [1986] 2 Lloyds Rep 441


England and Wales

Cited by:

CitedWRM Group Limited (Formerly Known As WRM Logistics Limited) v Wood; Burcher; Wood; Chick and Irving CA 21-Nov-1997
Breach of share sale agreement. . .
CitedBOC Group Plc v Centeon Llc and Centeon Bio-Services Inc CA 29-Apr-1999
The court was asked whether a clause in a share sale agreement setting out the payment obligation worked to preclude the purchaser from exercising a right of set-off when the time comes to pay a later instalment of the price.
Held: The appeal . .
CitedRemblance v Octagon Assets Ltd CA 17-Jun-2009
A statutory demand was served against the guarantor of the lease after rent arrears arose. He applied for the demand to be set aside, and now appealed against its refusal. He said that the court would have set aside such a demand against the tenant, . .
Lists of cited by and citing cases may be incomplete.


Updated: 26 May 2022; Ref: scu.244718